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Philadelphia 2020: Chapter One

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The following is a fictional account.

 

Chapter One

His face was frozen.  His jaw clenched.  His brow furrowed.

Chief Deputy Mayor Marty Calubra looked at the one-page document in silent shock for a full two minutes before he erupted with a torrent of obscenities.

"What the fuck is this?" he screamed.  "Is this your idea of some kind of fucking joke, Beck?"

City Finance Director Rob Beck gulped and shook his head.

"Marty, I'm sorry, but they are real," Beck said. "I just got the final numbers today."

"Oh, Jesus," Calubra muttered. "Oh, Jesus. What you are telling me is that we are facing close to a $460 million deficit next year?"

Beck nodded.

"You mean over the next five years don't you," asked Jose DiDonato, the mayor's liaison to City Council.

"No." Beck said. "I mean a $460-million hole next year - for the 2019-2020 fiscal year."

"Oh, Jesus," DiDonato said. "And maybe a another $460 million the year after that?"

This time is was Budget Director Amir Mulroney's turn to nod.

"Yep," he said, "in fact, it could be more, unless the economy improves and tax collections pick up.

He caught Calubra's glare and quickly added: "But, we hope it is less."

 "Look," said Calubra. "I've got to explain this to the mayor, so you better explain it to me.  How did we end up with a balanced budget one year and a this big a hole six months later?"

Philadelphia, or so the joke went, had a strong Chief Deputy Mayor form of government.  The mayor, as she liked to point out, did not like to "wallow in details."  That left Calubra, at age 32, as de facto boss of city government.  A short, blunt, profane product of a South Philly Mexican-Italian family, he had successfully managed the mayor's winning campaign in 2015. He moved into his City Hall job in 2016 and had been ensconced there ever since, in an office adjoining the mayor's, serving as her gatekeeper, chief strategist and adviser on all matters political and governmental.  One of his nicknames was The Decider. The others were unprintable.

Now, it was November 2018. The mayor was running for re-election.  The primary was in May and there was talk of her having rivals.  The last thing Calubra needed was a sudden $460 million hole opening up in the city's 2019-2020 budget.

"You guys realize the mayor has to give her budget address in February - 10 weeks before the primary," DiDonato said, as if he expected that statement to make the $460 million disappear.

You should have done what I suggested with the PGW money, Beck thought - but did not dare say it.  The city had realized a windfall in the last year of the Nutter administration when it sold the gas works to a Texas-based gas conglomerate for $500 million.

Beck proposed setting it aside as a rainy day fund. Instead, City Council went on a spending spree. The mayor used it to finance her pet projects. City employees got a big raise. The money was used to patch the deficits created by this largesse. The city blew through the $500 million in five years.

Now it's time to pay the piper, Calubra thought, looking at the paper on his desk.  It was a terse summary of the components of the $460 million hole.

 

Revenues: Down $108 million

Wage tax collections down 4%           -$62,000,000

Business tax collections down 4%      -$22,000,000

Real Estate Transfer Tax down 10%   -$24,000,000

 

Expenditures: Up $352 million

15% increase in health insurance costs for employees  +$ 50,000,000

Increased pension fund contribs under P.S. 332            + $225,000,000

Hire 95 guards for new city prison (opening 6-2019)    + $13,000,000

Decline in state reimbursement for Human Services     + $ 64,000,000

 

Total:  $460 million

 

"Damn, this recession," Calubra said, more to himself than to the assembled scrum of aides.  It had begun in 10 months before, after OPEC jacked up the price of crude oil by 20 percent, sending the world stock markets tumbling, and putting business expansion into a deep freeze. The jobless rate was approaching 11 percent. Gas was $6.50 a gallon at the pump. It was the worst economic downturn since 2008.

"Where's the mayor," asked DiDonato, suddenly afraid she would pop her head in the door and ask: "What's up?"

"Don't worry," Calubra said. "She's in Washington at a White House prayer meeting."

"What are they praying for?" DiDonato asked.

"An end to the recession," Calubra said, rolling his eyes. "It's what we get for having an evangelical conservative for President."

It was also a sign the city shouldn't look for any help from the federal government.  President Mike Huckabee was dead set against raising the federal deficit.  When the recession hit, he refused to provide stimulus funds, saying the government was still paying for spending its way out of the 2008 recession.

Instead, Huckabee started a round of White House prayer sessions. "End the Recession Prayer-a-thons," he called them.  Today, it was the turn of big city mayors to pray for divine intercession in the economy.

Calubra looked at the expenditure list and sighed. "Give me the big picture on what's going on here," he said to Beck.

The Finance Director cleared his throat.  He was a thin, deliberative-type whose Chestnut Hill reticence earned him the nickname of "Silent Rob" in City Hall.

"Our basic problem is that we have roughly the same number of employees today as we did 10 years ago - and 10 years before that," he said. "And while we can keep the lid on wages, we cannot do anything about the cost of fringe benefits.  We have to pay the going rate on health insurance.  We are legally obligated to pay pension costs.  And the costs of both keep going up at a rate higher than inflation - much higher. It's not a new problem, but it's getting worse."

"So, you are suggesting we lay off 2,000 or 3,000 employees to balance this budget," asked DiDonato, thinking: How could I ever sell that to City Council?

"I am not suggesting anything," Beck said. "I was asked to explain the big picture.  We've had opportunities in the past to change this trend, but no one could bring themselves to do it. For instance, remember in his first term when Nutter tried to get the unions to agree to pension changes?  He couldn't swing it. They ended up asking for new hires to volunteer to switch from a guaranteed pension to a 401K."

"And how many have volunteered," asked DiDonato.

Beck looked down at his legal pad: "Out of a workforce of 23,000, about 2,300 - and most of them are managers who aren't covered by unions and who were made to switch."

"And now we've got to cough up $225 million in one year to help the pension fund?" Calabra asked.  "Can't we get out of that?"

"I wish we could," said Beck.  "But, it's state law.  The Pension Fund Stabilization Act of 2014 requires local governments to meet certain levels of funding for their pensions - and that's how much we are short.  In fact, we'll have to pay the same additional amount into the fund next year and the year after that. It's a mandate."

"But is it a mandate that could be, say, extended or delayed?" DiDonato asked.

"I doubt it," said Calabra. "Not with Daryl Metcalfe as governor."

Metcalfe was a conservative Republican, a former state legislator and known Philly-hater.  He once called it the "Whore of Babylon," and his answer to pleas of help from the city - on any matter - was a consistent, "No."

Calabra glanced as his computer screen, where a chime indicated a new email.

"Gentlemen," he said. "The mayor's just returned from Washington.  We'll have to conclude this meeting.  I'll brief her on the situation and get back to you by day's end.

One question: How much would we have to raise the wage tax and business taxes to fill this hole?"

Beck removed a small calculator from his coat pocket and tapped in some numbers.

"About 25 percent," he said.

"Santa Maria," Calabra whistled, as he grabbed the paper and headed to the office of Mayor Blondell Reynolds Brown.

 

Chapter Two: Marty confronts a public relations disaster.

 

 

 

This short story is fiction, but the facts and figures are real. It is based on the estimation that the tax and spending policies of the city for the last 10 years will continue for the next 10 and it carries them forward to 2020. The crisis in this story is caused by a slight decrease in tax revenue and several extraordinary expenses.  In fact, it is likely that the city - and other municipalities - will have to make additional contributions to their pension funds. Such legislation is already under consideration in Harrisburg.  And chronic overcrowding at the city-owned prisons could lead to construction of a new corrections facility, though none is currently planned. A separate part called "Facts and Figures" will outline current spending trends and projections going forward. This series was written and reported by Senior Editor Tom Ferrick Jr.

 

 

 

 

 

 

 

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